India's Kingfisher and Deccan to merge

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Kingfisher and Deccan will be merged in April under a new holding company

More consolidation is on its way in the fast-changing Indian market with low-cost carrier Deccan and full-service carrier Kingfisher Airlines planning to merge as a single business entity.

Privately-owned Kingfisher's parent UB Group bought into publicly traded Deccan last year, initially acquiring 26% and later increasing its stake to 46%, before lifting it further to 49.8%. After the initial buy-in, consulting firm ­Accenture was hired to see how the two airlines could work together, and recommended a merger under a common holding company with a single management team. The recommendation was recently accepted and plans call for Kingfisher to be merged into the Deccan Aviation holding company by 1 April, with UB Group having majority ownership.

The company will remain publicly traded but will be renamed Kingfisher Airlines Ltd. Kingfisher and UB head Vijay Mallya will be chairman and chief executive while Deccan's executive chairman, Capt GR Gopinath, will be vice-chairman. For now at least, the two brand names look set to be retained for flight operations and their business models kept largely intact. However, Deccan has in recent months been progressively adopting the corporate colours of Kingfisher (see picture) while adding some in-flight frills.

India's air transport market has been growing rapidly since Deccan's 2003 launch, which was followed by the launch of many other airlines, including Kingfisher in 2005. Almost all of the country's carriers are losing money, however, and over the past year there have been several consolidation moves by the stronger players. In addition to the Kingfisher-Deccan tie-up, Jet Airways acquired the former Air Sahara, which now operates as JetLite, and state-owned Air India and Indian Airlines were merged under the Air India name.

Meanwhile, Kingfisher is ­continuing to seek rights to operate international services but its hopes that they would be secured before the end of 2007 were dashed. India's existing civil aviation policy states that privately-owned carriers can only operate international services after five years of continuous operations.

Several carriers have launched in India over the last five years and many, including Kingfisher, are lobbying hard for the restrictions to be eased. A new civil aviation policy has been under consideration for some time but government ministers are now at odds over proposals to allow more privately-owned airlines to operate ­international services.